The FHA or Federal Housing Administration loan program provides two advantages to the borrowers and more flexible guidelines:
- Individuals applying for this program can make a down payment as low as 3.5 percent
- Individuals with credit issues in the past can easily apply for the FHA loan.
These are the primary benefits offered by an FHA loan, when compared to a regular mortgage loan. But they are not the only benefits. Here are more advantages:
Smaller Down Payment
The advantages listed above attract the people to the program. But it is particularly the low down payment that makes it more attractive. Researchers found that 64 percent of the individuals prefer FHA loan because of the smaller down payment. This is the best advantage offered by the FHA loan to purchase a property. Individuals who apply for this loan have to pay as low as 3.5 percent down payment of the purchase price. On the other hand, when it comes to regular mortgage loan, individuals have to pay at least 5 percent or more of the down payment. This is why FHA loan is more popular than a conventional or regular mortgage loan.
Flexible Qualification Guidelines
Lower Credit Scores and Debt Ratios
If you have a too low credit score for a conventional mortgage loan, you can still deem yourself qualified for an FHA loan. This is another benefit of an FHA loan. When compared to a conventional or regular mortgage loan, the credit score cutoff is usually a little less. The numbers are still subjected to change. There is still no industry-wide standard for cutoff point when it comes to the credit scores.
Easier ‘Streamlined’ Refinancing
Individuals who refinance have another advantage to grasp for the FHA loan. HUD provides a ‘streamline’ refinance program that tends to minimize the paperwork usually associated with the home refinancing methods. As a matter of fact, an FHA streamline refinance can be achieved with no property appraisal. Refinancing can also save you loads of money particularly if the mortgage rates drop to a significant amount. And the individuals who use the FHA program are liable to refinance with less chaos than individuals applying for conventional home mortgage programs.
Down Payment Gifts
There are many down payment gifts provided by various kinds of mortgage loans. When it comes to conventional or regular mortgage loan, you are probably eligible for a limited gift amount. But when you apply for an FHA loan, you can have the complete down payment gifted to you totally.
Know more about FHA loan here.